UPDATE: German Chancellor Friedrich Merz has called for the European Union to unlock up to €140 billion (approximately $A249 billion) in frozen Russian assets to finance Ukraine’s ongoing war effort. This bold proposal represents Germany’s first public support at this level, signaling a significant shift in stance amid the escalating conflict.
In a recent Financial Times editorial, Merz outlined a plan for an interest-free EU loan designed to provide long-term, stable support for Ukraine without infringing upon property rights. The proposal stipulates that the assets would remain frozen until Russia compensates for the war, addressing prior legal and financial concerns that had caused hesitancy among Germany and other EU nations regarding asset confiscation.
Merz emphasized the urgency of the situation, stating, “We need a new impetus to change Russia’s calculations. Now is the moment to apply an effective lever that will disrupt the Russian president’s cynical game of buying time and bring him to the negotiating table.” His remarks come ahead of an informal EU summit in Copenhagen next week, where this proposal is expected to dominate discussions.
The plan suggests that the loan would initially be guaranteed by EU member states and subsequently backed by the EU’s long-term budget starting in 2028. This framework aims to provide necessary funding while maintaining legal safeguards. The Chancellor’s statement marks a pivotal moment, as it is the first time he has publicly supported a scheme to allocate the roughly €210 billion (around $A374 billion) held in a Belgian depository to Ukraine without outright confiscation—an issue that has been a contentious red line for many EU member states and the European Central Bank.
In support of this initiative, Vice Chancellor and Finance Minister Lars Klingbeil reiterated the need for Europe to apply maximum pressure on Vladimir Putin to expedite the end of the war. “It is right to make greater use of frozen Russian assets. Germany is prepared to explore new avenues that are legally possible and responsible,” Klingbeil stated.
The urgency of this proposal is underscored by uncertainty regarding the United States’ commitment to Ukraine under President Donald Trump, who has suggested that Europe must shoulder a greater share of its defense responsibilities. As the conflict drags on, the EU’s approach to funding Ukraine’s defense is more critical than ever.
Merz also advocated for a structured disbursement of these funds, proposing that payments be made in tranches, with decisions on arms procurement to be made collaboratively between Kyiv and EU member states. Until now, the EU has only utilized the interest generated from the frozen Russian assets, which were initially frozen following Moscow’s invasion of Ukraine in February 2022.
Germany, as the EU’s largest economy and Ukraine’s second-largest military backer, is now taking a leading role in shaping the future of financial assistance to Ukraine. This developing situation will be closely monitored by officials and analysts as it could herald a new phase in the EU’s response to the conflict.
Stay tuned for updates as this story unfolds and the EU prepares to discuss these pressing matters in the coming days.
